Oil bond pressure persists

Despite a sharp fall in global crude oil prices, the average price of the Indian basket of crude oil during 2008-09 was still higher than 2007-08.

The average price of the Indian basket of crude oil during 2008-09 was higher at $83.57 a barrel as compared to $79.25 a barrel during 2007-08.

Moreover, the benefit of softening of the international crude oil prices has been partly offset by the depreciating rupee. “The rupee has depreciated by around 28 per cent from Rs 40.03 per US dollar in April 2008 to the current levels of Rs 51.25 per US dollar in March 2009,” the petroleum ministry said in an internal note.

As the benefits of international oil prices got capped on account of sharp depreciation of the Indian rupee against the US dollar, the ministry has sought an additional Rs 10,306 crore of oil bonds from the finance ministry to tide over the under-recoveries of oil marketing companies (OMCs) during 2008-09.

Forwarding the details of the audited claims of under-recoveries on sale of petroleum products as submitted by the OMCs, the petroleum ministry has told the finance ministry that total under-recoveries on the sale of petrol, diesel, LPG (cooking gas) and kerosene by the three OMCs (Indian Oil, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd ) stood at Rs 1,03,292 crore.

Under the burden sharing mechanism already approved by the government for 2008-09, it was decided that the entire under-recovery on the sale of the four sensitive petro-products (petrol, diesel, LPG and kerosene) during 2008-09 shall be compensated fully.

“The upstream oil companies (Oil and Natural Gas Corp, Oil India Ltd and GAIL) have contributed Rs 32,000 crore during April-December 2008 through discounts to OMCs. The government has so far issued bonds worth Rs 60,983 crore,”the petroleum ministry has written to the finance ministry.

“The balance amount of Rs 10,306.33 crore of under-recoveries for 2008-09 are yet to be compensated for and met through the issue of oil bonds,” the note added.